SMB Training Blog

Meeting traders in Chicago next week because you ALWAYS trade with stops

This was a bittersweet week for traders on the Street.

The sweet? We saw one of our top traders post three 200k days. In one week, he made nearly as much as his best month ever. His goal of making 8-figures in a year became more of a reality.

Our options desk struggled. They shorted volatility and got stopped out. But, but, but… they got stopped out to live to play another day. They lost ONLY the amount of their max loss. Strong risk management brought losses, but losses that are manageable.

One of my trading colleagues said bluntly, summing up this week perfectly, to a star trader,”You always trade with stops. Always!”

The risk management at our desk in NYC has improved greatly since inception. (Think KBIO.) Dr. Steenbarger has taught me so much about the best way to think about risk management from the firm’s and trader’s perspective.

The bitter? Four friends and/or friends of friends at trading firms lost more than, as described to me by one trader, “what they could make in a trading career”. All of these traders were consistent 5m plus per year traders. All of them. A failure of risk management in one after-hours moment with volatility products (read Howard Lindzon on this) challenged their very trading careers.

When hearing unfortunate stories like these great traders losing so much, it reminds us to adhere to our stops as traders. And double down on our risk management as traders AND trading firms. Each firm is only as solvent as good risk management. If these truly talented, impressively large producers in a few bad moments could get hit so hard, then we all can.

I will be in Chicago this week, Monday and Tuesday, meeting with traders. First, I would like to be there for some good friends and their friends. We say trading is really hard but only veteran traders understand what his really means. It is really hard. How many people can withstand one bad moment causing so much consequence? Second, there are many traders looking for new homes after this week. We are open to discussions with traders looking for a new home. Many are being displaced as a result of this week.

SMB in our JV with KTG offers tremendous value for traders with:

When you trade as long as I have, you will have seen and made every mistake you can make. I shake my head at some of the dumb things I have done as a trader and Managing Partner. For all us, we have to keep getting better and learning from our failures.

I overheard one of our Black Shirt earners saying so much to a new hire just this week outside my office.

Ray Dalio wrote,

“I saw that to do exceptionally well you have to push your limits and that, if you push your limits, you will crash and it will hurt a lot. You will think you have failed – that won’t be true unless you give up. Believe it or not, your pain will fade and you will have many other opportunities ahead of you, though you might not see them at the time.”

I finished my second book, The PlayBook with “You can be better tomorrow than you are today!” Stop losses, risk management, and learning from failure to become better is the large takeaway from this historic week on the Street.